Legal Checklist for Charitable Donations

The holiday season tends to bring out the best in us. From toy drives to meals-on-wheels, there is a variety of ways to give back to our community especially during this time of the year. Since donating to charity usually involves cash or property (defined as something other than cash), you want to make sure your donation safely goes to the right charity and you understand the rules surrounding charitable donations, so here are some important steps to take when donating to charity.

Before you donate to charity

Unfortunately, even during this altruistic time of the year, there are organizations and people trying to take advantage of the charitable donations made by generous people like you. No matter how much or how little you donate, you want it to go to the right place. Here are a few things to keep in mind when vetting for charities to donate:

Do your research.Get the organization’s legal name, contact information, mission, how the donation will be used, and any other important piece of information. If you can’t find any of that online, you can request detailed information from the charity itself. If they refuse to offer the information, this should raise a red flag.

Even if there are no red flags in your initial research, do some more research of the organization. Include some terms, like “scam,” in your search. You may be able to quickly find out how charitable your “charity” is this way.

Be discerning.Use your best judgment when donating to charity. It’s best to pay by check or credit card so there are records. If a charity asks for only cash donations, this might be another red flag.

After you donate to charity

No matter how little your contribution is, be sure to get a record of your donation so that you can deduct it from your taxes! Usually, cash donations fall under two categories: less than $250 and more than $250. Let’s say you donated less than $250, the only form of record you really need is a check or receipt. On that record, it should include the following items: the charity’s name, the amount of donation, and the date of contribution. On the other hand, if you’re donating more than $250, the charity is required to draft a document stating how much you donated and whether or not you received anything in exchange of your contribution.

If you’re thinking of donating property that’s valued anywhere between $500 to $5,000, you may need more detailed records so that you can deduct it from your taxes. The charity will need to provide a receipt and written acknowledgement, and you should include how and when you initially got the property before your donation.

Before you claim a charitable contribution on your federal income tax return

It may be the last thing on your mind but when donating to charity, you can claim it on your federal income tax return. In return, you may be able to receive a tax deduction. However, the IRS only allows you to deduct up to 50 percent of your adjusted gross income (Line 36 on IRS Form 1040) every tax year. The good news is that if you end up donating more than that, you may be able to carry the excess up to five years.

However, not all nonprofit groups qualify for tax deduction. Most qualified organizations include churches, nonprofit schools and hospitals, veterans’ groups, and public parks. Some popular charities that qualify are Goodwill, Red Cross, and The Salvation Army. On the other hand, nonprofit groups like political groups as well as social and sports clubs do not qualify. Be sure you understand the differences before you claim a charitable donation on your tax return.

How to claim a charitable contribution on your federal income tax return

Now that you’ve done your due diligence, it’s time to claim your charitable contribution on your federal income tax return. Be sure to file Form 1040 and itemize the deduction on Schedule A. Without doing this, you won’t be able to deduct your charitable donation. On the other hand, if you’re donating property that’s worth more than $500, you’ll need to file Form 8283 (Noncash Charitable Contributions).

We hope this checklist makes giving back this holiday season that much easier and enjoyable! What are your favorite ways of giving back?